Apfa tells FCA to tighten unregulated product rules

Apfa tells FCA to tighten unregulated product rules

The Association of Professional Financial Advisers (Apfa) has called for the Financial Conduct Authority (FCA) to tighten the rules around the provision of unregulated investments.

It said retail investors were being sold inappropriate unregulated investments held within Sipp or Sass products.

Chris Hannant, director general of Apfa, said tackling this issue would lead to a cut in the industry-paid for Financial Services Compensation Scheme levy, which cost investment advisers £94m in 2016/17.

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He said: “The regulator, the government and advisers should work together to protect consumers from high-risk or fraudulent investments in which they are highly likely to lose their money.

“The FCA needs to do more as the current system is not working. A more thorough exploration of the options is needed with a tightening of the regulatory framework. 

“Scammers are exploiting grey areas in the system to the detriment of consumers.

“Compensating people who have received a bad service, been mis-sold a product or conned should be the last resort.

“The level of FSCS levies is an indicator of the effectiveness of the regime in protecting consumers – the aim should be to minimise the need for compensation not just working out who pays for it.”

Mr Hannant welcomed the Chancellor’s plans to crack down on cold calling - announced in the Autumn Statement - as a step in the right direction but he said the regulation in place also needs to be reconsidered as it is not sufficiently stringent to prevent retail consumers from ending up with unregulated products.

He said advisers should also play their part in warning clients about fraudulent investments by ensuring they have robust controls in place, by reporting any suspected scams to the FCA and committing to prevent their retail client’s funds ending up in unregulated investments.

A spokesman for the FCA said its remit was set by HM Treasury, which has been asked to comment.